Ofcom to triple bandwidth charges- so will bills go up accordingly?

If you use a mobile phone, your bill could be set to rise following Ofcom’s latest announcement on new bandwith usage charges. The telecoms regulator sets the price at which use of the UK’s bandwidth is sold to mobile phone operators, but after consulting on the notion that the current £64.4m annual charge wasn’t a market rate, a new charge of £199.6m per year has now been announced- over a threefold increase. Unsurprisingly Britain’s mobile phone operators are not best pleased and are warning of price rises for consumers.

The new announcement follows an extensive consultation period- Ofcom were first charged with calculating an actual market rate by the Government back in 2010, and the latest figure is lower than the latest estimate of £228.3m floated in February and far less than the initial five-times increase they first came up with. So really, the mobile operators should be pleased they’ve got off lightly, and accept that they need to pay a market price rather than pocketing all the profits for themselves, right?

Unfortunately not. Operators have not ruled out raising prices to absorb the cost of the new fees- under the new charges, Vodafone and O2 will see their fees more than treble from £15.6m a year to £49.6m. EE’s charges will rise from £24.9m to £75m, while Three’s bill will go from £8.3m to £25m. The new fees will be introduced in two phases and will be in place by the end of October next year.

A spokesman for EE wasn’t best impressed, telling the Telegraph:

“We think Ofcom has got this wrong. The proposed licence fees for 1800MHz spectrum are based on a flawed approach."

"The trebling of fees is bad news for British consumers and business as it raises the risk that we won’t be able to offer the best prices, and invest and innovate at the pace we and our customers would like,” he continued, passive-aggressively, finishing that “we’re also very disappointed that Ofcom has not reflected the higher costs we’ve taken on to meet enhanced coverage obligations that Ofcom and Government encouraged us to accept.”

A Vodafone spokesman said the company would be “reviewing Ofcom's new fees” and that it was "too early to say" whether costs would be passed on to consumers as they represent “a significant increase” taking into account the investment they are putting into their “network and services”.

An O2 spokesman said, concisely: "We're examining the decision in detail before deciding how best to proceed."

Three declined to comment.

Ofcom, however, is unimpressed. "We have listened carefully to the arguments and evidence put forward by industry, and conducted a complex and comprehensive analysis to determine the new fees,” said Philip Marnick, Ofcom's group director of spectrum.

"The mobile industry has not previously had to pay market value for access to this spectrum, which is a valuable and finite resource, and the new fees reflect that value."

Ofcom continued: "The operators have had five years’ notice that the fees would be increased to reflect full market value and we expect them to have budgeted for this," said a spokesman.

“We’ve listened carefully to the arguments and evidence put forward by industry. The fees announced today are in line with analysts’ expectations and with the amounts that operators pay for accessing spectrum in other countries.”

However, the final effect on consumer bills will remain to be seen, as shareholder profits are likely to be more important than happy customers, particularly if any increase ends up being industry-wide.